You May Not Want to Hear It, but the Microsoft-Nokia Deal IS Working

Microsoft is the company everyone loves to hate. And it's not just Apple iFans that bemoan all things Microsoft; that goes back decades and isn't likely to change anytime soon. It seemed analysts and disgruntled investors alike blamed Microsoft when Windows 8 was rolled out for not single-handedly re-energizing the PC industry; as if that's even possible.

So it's not surprising the Microsoft naysayers were out in force expressing their displeasure when it teamed up with struggling Nokia to dive into the high-end smartphone market. Take on Apple? Samsung? Insanity. Thing is, with each passing quarter, the news for both Nokia and Microsoft keeps getting better, in spite of what some would have you believe.

A few highlights
Though Microsoft didn't quite go all-in with Nokia when it came to which manufacturer's smartphone would run Windows phone OS, it's working out that way, regardless. According to a report by AdDuplex, as of April, 80% of all Windows phones sold globally are made by Nokia, led by its flagship Lumia 920 device.

Google's Android and Apple's iOS still rule the domestic smartphone OS marketplace of course, owning 51.7% and 41.4% through Q1 of this year, respectively. But interestingly, according to Kantar Worldpanel ComTech, iOS and Windows phone OS both grew faster than Android compared to the first quarter of 2012, with iOS leading the way up 2.3 percentage points, followed by Windows Phone's 1.8 percentage point gain.

Here's where it really gets good
The success Verizon had in Q1 of this year selling Lumia smartphones, particularly compared to the first quarter of last year, is a significant win for both Nokia and Microsoft. Sprint is also reaping the benefits of upgrading its smartphone offerings; enjoying a nice jump in sales thanks to Apple's iPhone.

Analyst Mary-Ann Parlato of Kantar said, "For Verizon, Windows' share rose from 0.2% in the three months ending April 2012 to 6.8% by the period ending April 2013. At Sprint, they continued to reap share increases thanks to their iOS offering- iOS sales share on Sprint grew from 33.4% to 38.4% over the last year."

The much-anticipated shift from feature phones to smartphones is complete after smartphones took over the No. 1 spot in sales compared to feature phones last quarter. And that's good news for Microsoft and Nokia. Of all the Windows phone OS sales in the past year, the majority of which are Nokia devices, 42% were feature phone users upgrading to smartphones, 25% swapped Windows devices, and 23% came from an Android smartphone. No word from Kantar on the remaining 10% of Windows OS sales.

The shift from feature to smartphones makes the number of users upgrading to Windows phone OS especially intriguing for Microsoft and Nokia fans. To put it in perspective, only 31% of Apple's iOS phone sales in the past year were from feature phone users stepping up to a smartphone. It's also worth noting that Microsoft is making inroads with younger smartphone buyers, "gaining share among those aged 25-34," according to Kantar's Parlato.

There's huge potential in the mobile phone upgrade market, and the data indicates Microsoft and Nokia are poised to take advantage of the shift. And with Apple reeling from a lack of new devices and questions regarding innovation, Microsoft and Nokia are primed to continue growing market share. Like it or not, the Microsoft and Nokia partnership appears to be working.

With the release of its own tablet, along with the widely anticipated Windows 8 operating system, Microsoft is making inroads in the booming mobile computing market. In a new premium report on Microsoft, a Motley Fool analyst explains that while the opportunity is huge, so are the challenges. The report includes regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

The article You May Not Want to Hear It, but the Microsoft-Nokia Deal IS Working originally appeared on Fool.com.

Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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